VietNamNet Bridge - Many strong brands in the plastics industry have fallen into the hands of investors from Thailand, Japan and South Korea, which has raised concern about the future of the industry.

Foreign investors are eyeing Vietnamese companies

After many share purchase deals, Thai SCG recently announced it had raised its ownership ratio in Binh Minh Plastics (BMP) to 51.1 percent.

SCG has also planned a total investment of $6 billion in Vietnam’s plastics industry from now to 2020. Prior to that, it spent $121 million to acquire shares in seven Vietnamese plastics companies.

However, at Tien Phong Plastics, Japanese Sekisui Chemical has replaced SCG as the second largest shareholder in the company.

Chair of the Vietnam Plastics Association (VPA) Ho Duc Lam commented that foreign investors have been professional and methodical in penetrating the Vietnamese plastics market.

Thai plastic products, for example, are given priority for official distribution at Metro’s wholesale centers throughout Vietnam.

Not only Thai, but South Korean investors are also eyeing Vietnam’s plastics market. After taking over Minh Viet Packaging from Masan, Dongwon Systems Corporation began collecting Tan Tien Plastics’ shares.

Not only Thai, but South Korean investors are also eyeing Vietnam’s plastics market. After taking over Minh Viet Packaging from Masan, Dongwon Systems Corporation began collecting Tan Tien Plastics’ shares.

Tan Tien is a leading manufacturer in the multilayer packaging sector with annual revenue of VND1.3-1.5 trillion.

Most of Tan Tien’s clients are large enterprises with strong brands, such as Unilever, Ajinomoto, Acecook, Trung Nguyen and Vinamilk.

Dongwon of South Korea is now the biggest shareholder in Tan Tien, holding 97.8 percent of shares. After taking over Tan Tien, it dismissed the Vietnamese board of management, including the founders, and appointed South Korean members to key positions in the company.

As for Japanese investors, MeiwaPax Group spent $16 million to buy Sapaco, while Oji Holding Corporation took over United Packaging, and Sagasiki Vietnam bought Goldsun.

Explaining the massive foreign investment in Vietnam’s plastics industry, economist Dinh The Hien said the investors are trying to take full advantage of the investment incentives in land, tax, input material, power and cheap labor costs to minimize the production cost. Vietnam’s membership in a lot of FTAs also benefits foreign investors.

Lam of VPA said he was concerned about the future of Vietnamese plastics companies which need capital, use outdated technologies and lack qualified workers.

However, the biggest problem is their heavy reliance on material imports. They will be hurt if the exchange rate, bank loan interest rate and import/export tariffs change suddenly.

According to VPA, plastics consumption per capita keeps rising, and is expected to reach 45 kilograms per head by 2020, which means 4 percent growth rate per annum. The growth of the industry is empowered by the recovery of the real estate and construction market.